Best Loan Option for Purchasing Car Worth $10,000

BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................3
Options for consideration................................................................................................................3
Discussion........................................................................................................................................4
Conclusion.......................................................................................................................................6
REFERENCES................................................................................................................................7
Appendix A......................................................................................................................................8

INTRODUCTION
The purpose of this report is to recommend a suitable loan option for purchasing car worth
$10,000. The report includes discussion of the funding option, available at Phuong. Two options
for financing the car are explored – credit card and personal loan over the period of 5 years. In
considering which option is the best, the factors of convenience, cost and flexibility have been
discussed. It is recommended that the best option for purchasing the car is to take loan for 5
years as it helps in achieving the long goal of achieving $90 fortnight.
Options for consideration
Car worth $10,000 is used over 4 years; savings has been done by Phuong and remaining amount
requires arranging through taking long term loan over 5 years. The two options available with
client are as follows; Option 1 through using credit card and option 2 by considering personal
loan for purchase of car.
PMI
Option 1: Pay through credit card
Plus Minus Interesting
 It is easier to start EMI instantly
with purchasing car.
 Reward system offered for every
purchase.
 The total cost of payment of car
over the 5 years will be $15,120
 No fortnight option
available
 Costly with interest
rate of 18% per annum.
 There is no application
fee; only annual fee of
credit card which is
$15 annual fee.
Option 2: Pay through personal loan
Plus Minus Interesting
 Cheaper than credit card
 Monthly EMI costs $209.61
 Fortnight option available
 Switchable with other bank at
low interest rate
 Application fee of $100
 Take atleast 15 days to
sanction loan amount
 Needs security to be
submitted with bank for
taking loan.
 Low interest rate,
which is 8.99%
payable annually
 Fluctuations in bank
interest rates every
year, which gives
options to pay more

loan amount at low
interest rate.
Discussion
Credit card Vs Personal loan:
Credit card is good for taking debt for short term while personal loan is good for those customers
who needs more time to pay back their debts taken from bank; below is the comparison of both
options:
Credit cards:
Credit cards have incredible flexibility because they revolve around a credit extension that can be
used as needed. You are offered a credit limit and you can regularly afford what you can afford
(as long as you pay at least one a month, as required). A basic visa limit starts at less than $ 500.
It's not like advancement, where you got a certain amount immediately and can afford it in full;
you can continue your debit card to your affordable equation (Curwin, & Slater, 2007). The visa
requirement is rolling around and, if you are not careful with your costs, you can spend more
than agreed or supervised. It is essential that you maintain credit card equity on an amount that
you can check and refund.
Repayment and interest rates: If in doubt, Credit cards bear a higher cost of financing than
personal promotions. On the date of registration of your debit card, you will have to make a
regular coin allowance. If you want to avoid paying interest, then you should pay attention to the
balance of the card in full each month (Lapin, 1994).
Fees and charges: In addition to the exciting cost, MasterCard usually charges an annual card.
There are additional fees for withdrawals - loan cost and loan rate (higher financing cost for
repayment). If you have to withdraw a large sum of money, personal credit may be a better
option as there is no commission to do so.
Benefit: Perfect for spending just the fact that you can bear to pay attention every month to avoid
the many costs of collusion. To provide ongoing assistance in case of non-mobile income
problems or to use the MasterCard to cover the monthly costs of the family unit, shopping cards